It’s a fact that not many like to acknowledge, especially those businesses on a new transformation project: ERP failure happens.
ERP implementations take up so much of a company’s resources and are intended to support such a wide range of processes. Thus failures can be truly devastating when they do occur.
Read More - ERP Disaster in SMEs: 5 Early Warning Signs
Big-name ERP failure stories have been widely reported on, striking fear into the hearts of businesses looking to implement or upgrade an ERP system.
However, the best thing about failure is the lesson that often comes from it.
There are a lot of things to be learned from some of the most talked-about ERP failure stories. Read on for four of those stories—and how to avoid making those same mistakes.
In 2013, Avon’s $125 million SAP enterprise resource planning project failed after four years of work, development, and employee testing.
In Canada, the company reported that the technology had actually increased the work of critical sales representatives. This then understandably discouraged the reps from utilizing the system in the regions in which Avon tested, and the makeup seller lost its reps in droves.
After the unsuccessful implementation in Canada, the company discontinued it in other locations as well. This did cost them a lot of money but was a hard business step.
ERP software can all brag about the number of modules and the available functionalities, but it doesn't have any meaning if it doesn't make business easier for you.
It is all about aligning the software to the business processes. Also if your staff is not comfortable in using the complex system they'll stick to the traditional methods. This can inturn create a lot of chaos in your business.
So before investing in any system, you should definitely consult your staff and whatever they're comfortable with.
Mostly a solution that is affordable and easy to use is recommended SMEs. Also, ensure that proper training is given to employees before moving to any other system.
One of the biggest names in chocolates and ERP failure is none other than Hershey's.
The company implemented ERP in 1999 and due to some complications failed to fulfill orders. Hershey's was unable to satisfy more than $100 million worth of orders for products they actually had in inventory.
As a result, their stock price dipped. Analysts didn't trust the company to properly deliver on promises again for nearly nine months.
Their are a number of reasons why Hershey's ERP implementation failure.
Firstly when Hershey's was given 48 months as a suggested deployment period, leaders at the company insisted on 30 months. Due to the rushed deployment, issues appeared that might have been resolved with more time.
ERP implementation does take a lot of time. You should make sure if your business is ready for a commitment like that.
The implementation also happened at the time when the company was in its busiest sales period of that fiscal year. In this case, SMEs are never not busy. They have to constantly maintain and increase momentum in their business.
Thus implementing an ERP may never be a good option. You should rather be looking for a platform that's affordable and doesn't take a lot of time to implement.
Read More - Why Does ERP Implementation Take So Much Time
This project failure happened in 2004. HP tried to implement multiple enterprise systems across their offices. They tried to transition their processes to a group of ERP applications.
But they found out they found that communication between both teams and software broke down. Thus there was a loss of data in the system.
The failed project cost HP over $160 million!
In any ERP project, you need to plan for problems. HP should have made a contingency plan for four, five, or six weeks. The company was clearly not prepared to deal with such a buildup of problems along with increased demand for their products in that time frame.
Make sure you learn from the company’s mistake and take a more proactive approach if you are going through with ERP implementation.
Most times after analyzing the scope of their problems SMEs don't even need a complex system. Just a solution that helps them digitize and automate their business processes.
Waste Management signed onto an 18-month ERP implementation deal with SAP that turned out to be a disaster. It dragged on for years after the project's start in 2005.
WM struggled with the project so badly that they ended up in court. They claim that they had been tricked by the SAP sales team by a flashy demo that never ended up materializing.
SAP counterclaimed that the project failure had been entirely due to WM's inability to provide key information and delegate knowledgeable employees to the project.
The case was finally settled in 2010. Safe to say, the ERP system did not provide the improvements or time-saving benefits that were originally expected.
Read More - Is SAP suitable for the Indian SME market?
Communication, communication, communication. It's good if you want to take up an ERP project but make sure your majority team is happy with the decision.
You should consult technology experts who have worked with ERPs before. Ask for references, get a timeline and make sure you have full confidence in your partners before you sign anything.
Most ERPs require to pay upfront even before implementation. Thus SMEs end up being powerless when the customer support is not as 'supportive' and when there is less 'ease' and more difficulty.
It’s undeniable that any ERP project carries a certain measure of risk along with it.
ERP failures can result in millions of dollars down the drain, lost customers and even courtroom battles. Thus as an SME, instead of making such a hefty investment, you should invest in a solution that helps you and your team digitize your business easily.
There should also be not much risk in terms of financial investment so that it doesn't affect your business's cash flow.
One such solution is TranZact. It is a web-based solution that is meant for SMEs to digitize their business processes from customer inquiry to dispatch. What is best about it is that the basic version of the product is free so that SMEs can relax and not worry about silly amounts of money.
Digitization is a must for the Indian manufacturing sector, specifically for SMEs. It will help enhance the effectiveness, profitability, and overall growth of the businesses. This will benefit the economy and allows for maximum consumer benefits and satisfaction.